Mendocino County Debt - Est. 6/10
($ Millions)
About 85% of the County's long-term debt is either unfunded pensions or pension obligation bonds borrowed to eliminate previous unfunded pension deficits. About 15% comes from other sources. Of that about half is related to real-estate financing.
Real Estate (Certificates of Participation - COPs)
Certificates of Participation are a means of financing real estate acquisition and improvement. The County has engaged in a complex series of financings and re-financings of real estate through the use of COPs, with later COPs re-financing earlier COPs. The County owes about $25 million in this form of financing as of June 2010. (As of today the County hasn't yet released its audited financial statements for the fiscal year ending 6/30/10 - these are pretty close estimates.)
Teeter Plan
The County’s Debt related to the Teeter Plan received quite a bit of attention in the Press a year ago. Interest seems to have died down. My sense is there are some significant issues here - but However, this form of Debt represents only about 3% of the County’s Total Long Term Debt.
The Teeter Plan is a State-approved system for collecting and disbursing property taxes. Counties collect all property taxes. Then they distribute most of them to cities, school and special districts. Under the Teeter Plan the County pays all taxes dues to these entities even though a certain number of taxpayers always default on paying those taxes. Counties usually borrow money to bridge the gap between the initiation of these delinquencies and their ultimate collection. They are almost always collected, even if the underlying property has to be sold at auction. The County takes the collection risk and receives the delinquent tax payments and the penalties and interest for the tax-defaulted properties when the taxes are paid.
Unfortunately, the County appears to have used about $11 million to finance operations that it has not yet collected from delinquent taxes. This creation of net long-term debt through the management of a Teeter Plan appears to be very unusual in California. Under normal circumstances the balance of Teeter-related debt due is less than the delinquent taxes receivable.
Frankly, we don’t know whether the “Teeter Debt” is somehow reflected on the Balance Sheet or not. What we do know is that it is not a significant part of the County's debt.
Fund Balances
There has been an issue in the past about the “Mental Health Fund”, but we're not sure what it is. Apparently the County received State funds for specific Mental Health program. But some amount of those funds were spent for other purposes. The State demanded several million dollars back. There is also an issue about receivables the County showed from the State that will probably never be collected - again for millions of dollars.
There's something to all this. But we haven't pursued it because the other causes of the County's debt - especially retireement benefits - has occupied our time.
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